From a scenario with no interest rate cuts at all to an assessment that the repo rate will be cut several times in 2025. The development over the past week has led an increasing number of players to predict a U-turn for the Swedish Central Bank. Handelsbanken is taking the lead and believes in three interest rate cuts (June, August, and September). This would push the repo rate down from the current 2.25 percent to 1.5 percent.
If the bank's economists are correct, the variable mortgage rate will be cut from its current level of around 3.1 percent to 2.4 percent by the end of 2025, based on the banks' average interest rates. The fixed rates are expected to move less, according to the bank's new mortgage rate forecast.
Worse than feared
The background, according to Handelsbanken's chief economist Christina Nyman, is that the scenario they made up in January regarding the US trade conflict is now outdated.
What's happening now is even worse than the prognosis we had then, and that was a strongly negative assumption. We expect the US to enter a mild recession, she says to TT.
The negative stock market development and general anxiety will make Swedish households more cautious, which in turn will contribute to Handelsbanken seeing a delayed recovery in the Swedish economy.
We're not assuming a deeper recession, but we're getting a weak growth and the Swedish Central Bank needs to implement interest rate cuts to counteract an overly negative development, she says.
Positive factors
Positive factors for the Swedish Central Bank are a stronger krona and an inflation development that is not expected to get out of hand. It's worse for the US and the American equivalent, the Federal Reserve.
For the American central bank, this is a really tricky situation, and they're being cautious with interest rate cuts, says Nyman.
Is stagflation (high inflation and high unemployment) a scenario for the US?
For the coming year, you could say that, since we're seeing high inflation and no growth. Then we expect inflation to fall back as a result of the weak economic development.
Earlier, Swedbank also made the assessment that the Swedish Central Bank now needs to implement interest rate cuts after the turbulent economic situation. Swedbank's assessment earlier in the week is that the Swedish Central Bank should implement at least one interest rate cut.
